Faculty of Economics and Business Administration Publications Database

Transfer Pricing, Double Taxation, and the Cost of Capital

Volume: 98
Number: 3
Pages: 445 - 452
Year: 1996
Keywords: Transfer pricing; International business enterprises; Taxation

The effects of double taxation are analysed when a multinational enterprise can shift profits by transfer pricing behaviour. It is shown that the well-known Hartman-Sinn neutrality result may not hold in this case. Surprisingly, an increase in the taxation of foreign dividends may lead to a lower cost of capital for the foreign subsidiary.